You Should Know About your Credit

Do you know what affects credit scores? Surprisingly, many people are not well educated about understanding their FICO. One out of four people have not seen their credit scores, and statistics shows that about "1 out of 5 Americans has very poor credit" (Perfect Credit, pg. 14). By law, FICO scores do not consider factors such as income, race, gender, and marital status. It does not matter if you are rich or poor, working class or middle class. When you apply for credit such as a car loan, credit cards, or a mortgage, the FICO score gives lenders a snap shot of the borrower's current credit risk based on their credit history. FICO scores are used by almost all of the lending industry to determine your credit risk and is one of the most commonly used scoring tools. You have 3 FICO scores, one for each of the three bureaus: Experian, TransUnion, and Equifax. All of these scores affect how much and what loan terms lenders will offer you. You can find more information at www.myficoscore.com. In addition, VantageScore is a new credit bureau of which you should be aware. This is a credit score jointly developed by the three credit bureaus. According to Lynnette Kahfani-Cox, author of "Perfect Credit", VantageScore has made headway in the financial world and now claim a 6% market share. Although this is a small percentage compared to the use of FICO scores, it illustrates that banks are looking at alternative credit ratings-so perhaps we should too.  At first glance, maintaining good credit may seem simple, but merely paying all bills on time does not ensure a high FICO score. Nonetheless, it is important to follow simple steps to improve your FICO scores, which can help you qualify for better rates from lenders.  In the upcoming newsletter, 3 series will be discussed: Perfect credit, bad credit, and fixing credit report errors.